Loan Identity Verification Form - DOC

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					                            SBA Policy Notice

TO: All Employees                                                          CONTROL NO.: 5000-901


SUBJECT : New SBA Requirements for                                         EFFECTIVE:      12/23/ 2003
                 Customer Identification Programs
                 Applicable to SBA Lenders Not
                 Currently Covered by Treasury
                 Regulations


TREASURY JOINT FINAL RULE ON CIP REQUIREMENTS

On November 3, 2003, SBA issued Information Notice 5000-887, Lender Compliance with
Treasury Requirements for Customer Identification Programs. The Information Notice
discussed the Joint Final Rule (31 CFR 103.121) issued by the U.S. Department of the Treasury
and various Federal financial regulators, pursuant to the USA PATRIOT Act, requiring Banks,
Savings Associations, Credit Unions, and Certain Non-Federally Regulated Banks to implement
a Customer Identification Program (CIP) by October 1, 2003. The Information Notice reminded
all SBA lenders subject to the requirements of the Joint Final Rule that SBA 7(a) Guaranty
Loans, and third-party financings made in conjunction with SBA 504 Loans, are subject to the
provisions of 31 CFR 103.121. The Information Notice also informed those SBA lenders not
covered by the Joint Final Rule that SBA intended to issue a Notice regarding the applicability of
CIP requirements to those lenders, and that SBA expected those lenders to begin planning a CIP.

NEW SBA CIP REQUIREMENTS APPLICABLE TO SBA LENDERS NOT COVERED BY
JOINT FINAL RULE

Based on the potential for identity fraud in SBA’s loan programs, SBA's Office of Inspector
General (OIG) recommended SBA issue an interim directive instructing all SBA lenders to
verify the identities of new customers involved with SBA programs. SBA agrees with the OIG's
recommendation and, with this Policy Notice, SBA is requiring those SBA 7(a) and 504
lende rs, including Small Business Lending Companies (SBLCs) and Certified Development
Companies (CDCs), not cove red by the Joint Final Rule to develop and implement a CIP
which complies with the requirements of 31 CFR 103.121 on or before June 30, 2004.
SBA’s new CIP requirements are an interim measure. When an SBA lender not covered by the
Joint Final Rule becomes subject to a final rule issued by Treasury extending CIP requirements
to that lender, the requirements of the Treasury final rule will supersede the requirements of this
Notice.

PURPOSE OF A CIP

The purpose of a CIP as required by this Policy Notice is to enable the SBA lender to form a
reasonable belief that it knows the true identity of the customer who is applying for an SBA 7(a)

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or 504 loan. The text of the Joint Final Rule (31 CFR 103.121) is attached as Exhibit A to this
Policy Notice. 31 CFR 103.121 sets forth certain minimum requirements for a CIP, which SBA
is now requiring all of its 7(a) and 504 lenders to implement.

SBA OIG REFERRALS

SBA lenders are reminded that, as required by SOP 50 50 and 50 51, any suspected irregularity
in SBA loan programs must be reported to the SBA Office of Inspector General’s Fraud Hotline
at 1-800-767-0385. Inconsistencies uncovered during the customer identification and
verification process fall within the category of suspected irregularities which must be reported to
SBA’s OIG.

GOVERNMENT LISTS OF KNOWN OR SUSPECTED TERRORISTS OR TERRORIST
ORGANIZATIONS

With respect to 31 CFR 103.121(b)(4), which requires that a CIP contain procedures for
comparing customer names with government lists of known or suspected terrorists or terrorist
organizations, SBA lenders are advised that no lists specifically relating to the CIP re gulations
have been designated by Treasury as of the date of this Policy Notice. However, SBA lenders
are reminded that Treasury’s Office of Foreign Assets Control (OFAC) regularly publishes a list
of Specially Designated Nationals and Blocked Persons which consists of individuals or entities
which are owned or controlled by, or acting for or on behalf of, the Governments of target
countries, or are associated with international narcotics trafficking or terrorism. All persons
subject to the jurisdiction of the United States (including all SBA lenders) are prohibited from
dealing with any individuals or entities on the OFAC list. The OFAC list can be located at
http://www.ustreas.gov/ofac.

CDCs NOT REQUIRED TO DUPLICATE PROCEDURES OF THIRD PARTY LENDERS

Although SBA is requiring CDCs to implement a CIP that complies with 31 CFR 103.121,
CDCs are not expected to duplicate the procedures of the Third Party Lender if the Third Party
Lender is regulated by a Federal functional regulator (as defined in 31 CFR 103.120(a)(2)) and
submits annual certifications to the CDC that it (the Third Party Lender or its agent) will comply
with the CIP requirements of 31 CFR 103.121 with respect to all third-party financings of 504
loans. Under these circumstances, it is acceptable to SBA if a CDC’s CIP states that the CDC
will rely on the Third Party Lender to verify the identity of the SBA customer. The CDC has the
option of performing its own verification of the identity of the SBA customer even if a Third
Party Lender has already complied with 31 CFR 103.121.

CURRENT SBA POLICIES AND PROCEDURES ON IDENTITY INFORMATION,
VERIFICATION AND RECORDKEEPING

All SBA lenders are advised that in addition to their CIP, they must continue to follow SBA’s
current policies and procedures with respect to identity information, verification and
recordkeeping. Those policies and procedures include, but are not limited to, the appropriate use
of the documents listed in Exhibit B.
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PENALTIES

Failure to implement a CIP, or failure to follow SBA’s existing policies and procedures
regarding identity information, verification and recordkeeping, could result in denial of liability
or other enforcement actions. Additionally, SBA lenders are reminded that they and/or their
SBA borrower/applicants may be subject to civil and/or criminal penalties for false statements
made in connection with identity information and verification policies and procedures.

SUPPLEMENTAL GUIDANCE

SBA recommends that lenders monitor the website of Treasury’s Financial Crimes Enforcement
Network (FinCEN) at http://www.fincen.gov. Supplemental guidance issued by Treasury in
connection with the Joint Final Rule will be posted on FinCEN’s website.

FURTHER REGULATORY ACTIVITY

SBA lenders are also advised to keep abreast of further USA PATRIOT Act regulatory activity
by monitoring the FinCEN website. We note that on May 9, 2003, FinCEN issued a Proposed
Rule extending the CIP requirements of 31 CFR 103.121 to “certain banks lacking a federal
functional regulator.” Additionally, FinCEN has stated that it intends to issue CIP rules
applicable to “loan and finance companies” and “persons involved in real estate closings and
settlements.”

DISTRIBUTION OF INFORMATION TO LENDERS

SBA field offices should share this Notice with all SBA 7(a) and 504 lenders.

Questions regarding this Notice may be referred to A.B. McConnell, Jr., Chief, 504 Program
Branch at (202) 205-7238 or by e- mail to andrew.mcconnell @sba.gov.


_______________
Hector V. Barreto
Administrator                                                     Expires: 12/1/2004




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                                                    EXHIBIT A
31 C.F.R. § 103.121

                            CODE OF FEDERAL REGULATIONS
                       TITLE 31--MONEY AND FINANCE: TREASURY
              SUBTITLE B--REGULATIONS RELATING TO MONEY AND FINANCE
             CHAPTER I--MONETARY OFFICES, DEPARTMENT OF THE TREASURY
    PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND FOREIGN
                                    TRANSACTIONS
                   SUBPART I--ANTI-MONEY LAUNDERING PROGRAMS
                         ANTI-MONEY LAUNDERING PROGRAMS
                    Current through November 14, 2003; 68 FR 64725


§ 103.121 Customer Identification Programs for banks, savings associations, credit unions, and
certain non-Federally regulated banks.

(a) Definitions. For purposes of this section:
(1)(i) Account means a formal banking relationship established to provide or engage in services,
dealings, or other financial transactions including a deposit account, a transaction or asset
account, a credit account, or other extension of credit. Account also includes a relationship
established to provide a safety deposit box or other safekeeping services, or cash management,
custodian, and trust services.
(ii) Account does not include:
(A) A product or service where a formal banking relationship is not established with a person,
such as check-cashing, wire transfer, or sale of a check or money order;
(B) An account that the bank acquires through an acquisition, merger, purchase of assets, or
assumption of liabilities; or
(C) An account opened for the purpose of participating in an employee benefit plan established
under the Employee Retirement Income Security Act of 1974.
(2) Bank means:
(i) A bank, as that term is defined in § 103.11(c), that is subject to regulation by a Federal
functional regulator; and
(ii) A credit union, private bank, and trust company, as set forth in § 103.11(c), that does not
have a Federal functional regulator.
(3)(i) Customer means:
(A) A person that opens a new account; and
(B) An individual who opens a new account for:
(1) An individual who lacks legal capacity, such as a minor; or
(2) An entity that is not a legal person, such as a civic club.
(ii) Customer does not include:
(A) A financial institution regulated by a Federal functional regulator or a bank regulated by a
state bank regulator;
(B) A person described in § 103.22(d)(2)(ii) through (iv); or
(C) A person that has an existing account with the bank, provided that the bank has a
reasonable belief that it knows the true identity of the person.
(4) Federal functional regulator is defined at § 103.120(a)(2).
(5) Financial institution is defined at 31 U.S.C. 5312(a)(2) and (c)(1).
(6) Taxpayer identification number is defined by section 6109 of the Internal Revenue Code of
1986 (26 U.S.C. 6109) and the Internal Revenue Service regulations implementing that section
(e.g., social security number or employer identification number).
(7) U.S. person means:
(i) A United States citizen; or
(ii) A person other than an individual (such as a corporation, partnership, or trust), that is

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established or organized under the laws of a State or the United States.
(8) Non-U.S. person means a person that is not a U.S. person.
(b) Customer Identification Program: minimum requirements.
(1) In general. A bank must implement a written Customer Identification Program (CIP)
appropriate for its size and type of business that, at a minimum, includes each of the
requirements of paragraphs (b)(1) through (5) of this section. If a bank is required to have an
anti-money laundering compliance program under the regulations implementing 31 U.S.C.
5318(h), 12 U.S.C. 1818(s), or 12 U.S.C. 1786(q)(1), then the CIP must be a part of the anti-
money laundering compliance program. Until such time as credit unions, private banks, and trust
companies without a Federal functional regulator are subject to such a program, their CIPs must
be approved by their boards of directors.
(2) Identity verification procedures. The CIP must include risk-based procedures for verifying the
identity of each customer to the extent reasonable and practicable. The procedures must enable
the bank to form a reasonable belief that it knows the true identity of each customer. These
procedures must be based on the bank's assessment of the relevant risks, including those
presented by the various types of accounts maintained by the bank, the various methods of
opening accounts provided by the bank, the various types of identifying information available,
and the bank's size, location, and customer base. At a minimum, these procedures must contain
the elements described in this paragraph (b)(2).
(i) Customer information required.
(A) In general. The CIP must contain procedures for opening an account that specify the
identifying information that will be obtained from each customer. Except as permitted by
paragraphs (b)(2)(i)(B) and (C) of this section, the bank must obtain, at a minimum, the
following information from the customer prior to opening an account:
(1) Name;
(2) Date of birth, for an individual;
(3) Address, which shall be:
(i) For an individual, a residential or business street address;
(ii) For an individual who does not have a residential or business street address, an Army Post
Office (APO) or Fleet Post Office (FPO) box number, or the residential or business street address
of next of kin or of another contact individual; or
(iii) For a person other than an individual (such as a corporation, partnership, or trust), a
principal place of business, local office, or other physical location; and
(4) Identification number, which shall be:
(i) For a U.S. person, a taxpayer identification number; or
(ii) For a non-U.S. person, one or more of the following: a taxpayer identification number;
passport number and country of issuance; alien identification card number; or number and
country of issuance of any other government-issued document evidencing nationality or
residence and bearing a photograph or similar safeguard.

Note to paragraph (b)(2)(i)(A)(4)(ii): When opening an account for a foreign business or
enterprise that does not have an identification number, the bank must request alternative
government-issued documentation certifying the existence of the business or enterprise.
(B) Exception for persons applying for a taxpayer identification number. Instead of obtaining a
taxpayer identification number from a customer prior to opening the account, the CIP may
include procedures for opening an account for a customer that has applied for, but has not
received, a taxpayer identification number. In this case, the CIP must include procedures to
confirm that the application was filed before the customer opens the account and to obtain the
taxpayer identification number within a reasonable period of time after the account is opened.
(C) Credit card accounts. In connection with a customer who opens a credit card account, a bank
may obtain the identifying information about a customer required under paragraph (b)(2)(i)(A)
by acquiring it from a third-party source prior to extending credit to the customer.
(ii) Customer verification. The CIP must contain procedures for verifying the identity of the
customer, using information obtained in accordance with paragraph (b)(2)(i) of this section,
within a reasonable time after the account is opened. The procedures must describe when the

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bank will use documents, non- documentary methods, or a combination of both methods as
described in this paragraph (b)(2)(ii).
(A) Verification through documents. For a bank relying on documents, the CIP must contain
procedures that set forth the documents that the bank will use. These documents may include:
(1) For an individual, unexpired government-issued identification evidencing nationality or
residence and bearing a photograph or similar safeguard, such as a driver's license or passport;
and
(2) For a person other than an individual (such as a corporation, partnership, or trust),
documents showing the existence of the entity, such as certified articles of incorporation, a
government-issued business license, a partnership agreement, or trust instrument.
(B) Verification through non-documentary methods. For a bank relying on non- documentary
methods, the CIP must contain procedures that describe the non- documentary methods the
bank will use.
(1) These methods may include contacting a customer; independently verifying the customer's
identity through the comparison of information provided by the customer with information
obtained from a consumer reporting agency, public database, or other source; checking
references with other financial institutions; and obtaining a financial statement.
(2) The bank's non-documentary procedures must address situat ions where an individual is
unable to present an unexpired government-issued identification document that bears a
photograph or similar safeguard; the bank is not familiar with the documents presented; the
account is opened without obtaining documents; the customer opens the account without
appearing in person at the bank; and where the bank is otherwise presented with circumstances
that increase the risk that the bank will be unable to verify the true identity of a customer
through documents.
(C) Additional verification for certain customers. The CIP must address situations where, based
on the bank's risk assessment of a new account opened by a customer that is not an individual,
the bank will obtain information about individuals with authority or control over such account,
including signatories, in order to verify the customer's identity. This verification method applies
only when the bank cannot verify the customer's true identity using the verification methods
described in paragraphs (b)(2)(ii)(A) and (B) of this section.
(iii) Lack of verification. The CIP must include procedures for responding to circumstances in
which the bank cannot form a reasonable belief that it knows the true identity of a customer.
These procedures should describe:
(A) When the bank should not open an account;
(B) The terms under which a customer may use an account while the bank attempts to verify the
customer's identity;
(C) When the bank should close an account, after attempts to verify a customer's identity have
failed; and
(D) When the bank should file a Suspicious Activity Report in accordance with applicable law and
regulation.
(3) Recordkeeping. The CIP must include procedures for making and maintaining a record of all
information obtained under the procedures implementing paragraph (b) of this section.
(i) Required records. At a minimum, the record must include:
(A) All identifying information about a customer obtained under paragraph (b)(2)(i) of this
section;
(B) A description of any document that was relied on under paragraph (b)(2)(ii)(A) of this
section noting the type of document, any identification number contained in the document, the
place of issuance and, if any, the date of issuance and expiration date;
(C) A description of the methods and the results of any measures undertaken to verify the
identity of the customer under paragraph (b)(2)(ii)(B) or (C) of this section; and
(D) A description of the resolution of any substantive discrepancy discovered when verifying the
identifying information obtained.
(ii) Retention of records. The bank must retain the information in paragraph (b)(3)(i)(A) of this
section for five years after the date the account is closed or, in the case of credit card accounts,
five years after the account is closed or becomes dormant. The bank mus t retain the information

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in paragraphs (b)(3)(i)(B), (C), and (D) of this section for five years after the record is made.
(4) Comparison with government lists. The CIP must include procedures for determining whether
the customer appears on any list of known or suspected terrorists or terrorist organizations
issued by any Federal government agency and designated as such by Treasury in consultation
with the Federal functional regulators. The procedures must require the bank to make such a
determination within a reasonable period of time after the account is opened, or earlier, if
required by another Federal law or regulation or Federal directive issued in connection with the
applicable list. The procedures must also require the bank to follow all Federal directives issued
in connection with such lists.
(5)(i) Customer notice. The CIP must include procedures for providing bank customers with
adequate notice that the bank is requesting information to verify their identities.
(ii) Adequate notice. Notice is adequate if the bank generally describes the identification
requirements of this section and provides the notice in a manner reasonably designed to ensure
that a customer is able to view the notice, or is otherwise given notice, before opening an
account. For example, depending upon the manner in which the account is opened, a bank may
post a notice in the lobby or on its website, include the notice on its account applications, or use
any other form of written or oral notice.
(iii) Sample notice. If appropriate, a bank may use the following sample language to provide
notice to its customers:

        IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT

To help the government fight the funding of terrorism and money laundering activities, Federal
law requires all financial institutions to obtain, verify, and record information that identifies each
person who opens an account.
What this means for you: When you open an account, we will ask for your name, address, date
of birth, and other information that will allow us to identify you. We may also ask to see your
driver's license or other identifying documents.
(6) Reliance on another financial institution. The CIP may include procedures specifying when a
bank will rely on the performance by another financial institution (including an affiliate) of any
procedures of the bank's CIP, with respect to any customer of the bank that is opening, or has
opened, an account or has established a similar formal banking or business relationship with the
other financial institution to provide or engage in services, dealings, or other financial
transactions, provided that:
(i) Such reliance is reasonable under the circumstances;
(ii) The other financial institution is subject to a rule implementing 31 U.S.C. 5318(h) and is
regulated by a Federal functional regulator; and
(iii) The other financial institution enters into a contract requiring it to certify annually to the
bank that it has implemented its anti-money laundering program, and that it will perform (or its
agent will perform) the specified requirements of the bank's CIP.
(c) Exemptions. The appropriate Federal functional regulator, with the concurrence of the
Secretary, may, by order or regulation, exempt any bank or type of account from the
requirements of this section. The Federal functional regulator and the Secretary shall consider
whether the exemption is consistent with the purposes of the Bank Secrecy Act and with safe
and sound banking, and may consider other appropriate factors. The Secretary will make these
determinations for any bank or type of account t hat is not subject to the authority of a Federal
functional regulator.
(d) Other requirements unaffected. Nothing in this section relieves a bank of its obligation to
comply with any other provision in this part, including provisions concerning information that
must be obtained, verified, or maintained in connection with any account or transaction.

[68 FR 25109, May 9, 2003]




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                                                       Exhibit B

          Identity Information (Name, Date of Birth, Address, Taxpayer I.D. No., Alien
           Registration No.)
           o SBA Form 4 (Regular 7(a))
           o SBA Form 912 (Regular 7(a) and 504)
           o SBA Form 4L (Low Doc)
           o SBA Form 1919 (SBAExpress)
           o SBA Temporary Form 2114 (Pre-Qual)
           o 7(a) and 504 Loan Authorization boilerplate requiring that prior to loan
               disbursement, the lender must obtain evidence that the borrower has an Employer
               Identification Number

          Identity Verification
           o IRS Form 4506 – Verification of Financial Information by IRS
           o Credit Reports (required for processing of most SBA loans)
           o Financial Statements (required for processing of most SBA loans)
           o 7(a) and 504 Loan Authorization boilerplate requiring that prior to loan closing,
               the lender must obtain from the borrower copies of the borrower’s organizational
               documents and borrowing resolutions
           o 7(a) and 504 Loan Authorization boilerplate requiring that prior to loan
               disbursement, the lender must obtain evidence that the borrower has all licenses
               necessary to lawfully operate the business
           o INS Form G-845 – Verification of INS Status (required for all non-U.S. citizens;
               applicants self-disclose this information on other SBA forms)
           o FBI Name Check/Fingerprint Card – SBA Form FD 258/Background
               Investigation (See, SOP 50-10(4), Subpart “A”, Chapter 6, Paragraph 4.d.)
           o SBA Form 750

          Recordkeeping
           o 13 CFR 120.471 – SBLC Recordkeeping Requirements
           o 13 CFR 120.826 – CDC Recordkeeping Requirements




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